MTD for income tax is relatively new. As part of HMRC’s new making tax digital scheme, by April 2024, those who are suitable should be filing their taxes through it. What exactly does it change, is it beneficial and should it be opted into early?
How it changes things
Some small businesses that don’t already do their taxes digitally will likely change their whole system. There is little to no reason for multiple accounting setups, so using one management tool is better.
The benefit of MTD for income tax
Business management tools will no longer be limited to spreadsheets and the like. Similar to what has happened with MTD for VAT, tools which allow better management of digital taxes will start to incorporate income tax into their scope. This will bring options to the market for those using it, and said options will always be improving due to the rising competition for user experience. For more details on the benefits of MTD, read here.
How to sign up
Signing up can currently only be done through HMRC-approved software, a list of which can be found here. In order to sign up, you will need your:
- Business name
- First property income collection date (landlords)
- Business’s start date (sole traders)
- Business email address
- National insurance number
- Accounting period and type (cash, standard, etc.)
After satisfying all of these criteria, you must also register to file self-assessment tax returns. This requires a government gateway login, which can be acquired when signing up.
After signing up
You need to submit quarterly updates to HMRC of your business income, via a digital record of all income and expenses. You also need to submit finalised income and expenses for the tax year through an end-of-period statement.
After this, you can pay your taxes digitally on the 31st of January the following year. You must still submit a tax return for the year before you signed up to MTD for income tax.